The new chancellor’s economic gamble and socially conservative agenda test the limits of coalition unity, as Germany confronts recession, militarisation, and a rising politics of selective solidarity
Though appearances can deceive, first impressions often prove both brutal and enduring. Newly elected German chancellor Friedrich Merz learned this the hard way: on May 6, he failed to secure the required majority in the Bundestag’s initial vote and, for a few tense hours, time in Germany seemed to freeze. While the coalition managed a second-round victory later that day, Merz nonetheless enters office in a terribly precarious position.
The message was clear: doubt, division, and fragile support across the Parliament. The “Black-Red” coalition is already showing early signs of disagreement. The government begins its mandate visibly fractured, with its cohesion under immediate question.
This climate of uncertainty, breaking with Germany’s tradition of political continuity and mirroring broader global instability, places immediate pressure on the new chancellor to prove his leadership. Two challenges dominate the agenda. The first is the economic recession that has gripped the country since 2023. Here, effective solutions must be delivered: Merz’s background at BlackRock sharpens expectations, but also raises suspicions over whose interests he truly serves.
Such tensions are heightened by his surprising pivot toward public debt, a move that defies Germany’s firm fiscal doctrine on internal domestic spending. Yet recovery cannot be addressed in isolation from international pressures: United States commercial tariffs, the costly ambitions of the European ReArm plan, and military support to Israel all demand financial agility. In this context, public debt is no longer merely a domestic concern, but a political gamble and a geopolitical necessity.
The second flashpoint is immigration. Merz’s socially conservative stance was central to his electoral strategy, but it now faces resistance within the coalition. The SPD has already condemned proposals deemed to violate fundamental rights, such as turning away asylum seekers and introducing permanent border controls. Meanwhile, the specter of CDU-AfD collaboration on immigration threatens to further translate the far-right agenda into political reality. Beyond the policy clash, Germany has already, significantly embraced a “solidarity public debt” built not on borrowed capital, but on a deficit of empathy and inclusion. Long-standing and observable practices of moral austerity operate as tools for managing internal contradictions: marginalising the vulnerable while placating the middle ground.
Merz’s agenda: Fiscal flexibility or political gamble?
Germany has historically made its avoidance of public debt a cornerstone of national economic identity. Its fiscal conservatism found its clearest expression in the Schuldenbremse (debt brake), a constitutional policy enacted in response to the 2008 financial crisis, tightly regulating public spending at both federal and state levels. Over time, this self-imposed restraint has led to chronic underinvestment in infrastructure, digitalisation, and public services, creating gaps that are now painfully visible. Still, the traumas of hyperinflation and economic collapse continue to haunt the German collective psyche, reinforcing a stubborn resistance to debt. Facing the delicate task of reshaping this foundational narrative, Merz is actively rebranding public debt as a strategic tool. What was once a taboo is now being cautiously rehabilitated and repositioned as essential to Germany’s national resilience in a rapidly shifting global order. This move to fiscal flexibility, recognised as the ability to adjust public spending in response to economic turbulence, marks a decisive break with past orthodoxy.
But this spin must not be dismissed as purely ideological; it is driven by cold geopolitical arithmetic. The US, retreating into aggressive economic nationalism under its insider-trading acting president Donald Trump, has imposed disruptive protectionist tariffs. With national export-heavy industries now facing higher barriers to one of its core markets, the government is being pushed to stimulate the domestic economy through significant public investment in infrastructure and social services. At the same time, Europe’s ReArm plan is accelerating the drive to expand the continent’s military capabilities in response to Russia, prompting a structural rethinking of national spending priorities. Additionally, ongoing financial support for Israel’s armed forces adds further pressure to a budget already stretched thin. These overlapping commitments require large-scale, coordinated investments that cannot be absorbed within the old framework. They no longer align with the realities of international insecurity and economic fragility.
Merz’s openness towards public debt is more than just a political recalibration; it represents a critical moment for Germany’s economic future. By cautiously adopting fiscal flexibility, he is gambling on the idea that strategic uncertainty can pave the way for restored stability: not through rigid budgetary discipline, but from the state’s ability to respond to global turbulence with assertive and coordinated investments. In this way, the CDU leader is recasting public debt not as a threat to the German model, but as its potential reinvention. However, the risks are enormous: any misstep could amplify public skepticism and further divide the already vulnerable Black-Red coalition. For his political survival, the Chancellor knows that he must still conform, to some extent, to the country’s established political habits. Economics aside, what truly stands out is a deeper reasoning of governance: one that manages not only financial resources, but emotional ones. It is a system structured around the scarcity of empathy, best understood through the twin lenses of solidarity public debt and moral austerity.
The solidarity public debt: A long-standing moral austerity trend
To picture Germany’s current trajectory, two interlinked dynamics must be broken down: solidarity public debt and moral austerity. These terms go beyond budget lines and official doctrines. They name a political logic rooted in an undeclared imperative to limit social and welfare spending not as a failure, but as a deliberate and stabilising function.
Solidarity public debt describes a form of borrowing in which political stability is secured at the expense of specifically targeted marginalised groups. This debt accumulates not in balance sheets, but in social fractures. It grows as the state tightens welfare eligibility, hardens migration rules, and shifts social responsibilities onto municipalities and civil society, all while presenting these measures as evidence of fiscal prudence. Its logic tragically resonates with a particular exclusivist rationale found within the German electorate: the shared belief that national resilience must be built on sacrifice, provided that it remains unevenly distributed. In this equation, those least protected carry the heaviest burden, maintaining the illusion of collective cohesion.
Such a socially accepted form of debt, far from being publicly demonised, directly feeds into moral austerity: an ideological discipline that frames empathy as a limited resource to be stretched to its minimum. Solidarity becomes legitimised only in its selectivity, where some struggles are clearly perceived as more relevant than others. Arguably, its most striking instance is the departure from a rhetoric of indifference to open denial in response to the Palestinian massacre, partly financed by German contributions but silenced in mainstream media discourse. By casting economic recovery as a moral struggle demanding restraint, maximised productivity, and loyalty, exclusion is rationalised: asylum seekers, minorities of migrant background, the long-term unemployed, and working poor are subtly recoded as undeserving of full social membership. Their suffering is not collateral damage, it is political fuel.
These two uncomfortable yet crucial concepts are evident in recent policy trends that predate Merz’s official appointment as Chancellor: increased surveillance and deterrence at the European external borders, the criminalisation of solidarity networks aiding undocumented migrants, and the open secret surrounding the reality in Gaza. These are among the most pressing manifestations of how Germany sponsors moral austerity through the establishment of a solidarity public debt mechanism.
In the end, solidarity public debt and moral austerity are harsh reminders of how deeply national priorities shape social cohesion. While the narrative of resilience and unity may be compelling, its foundation rests on a selectively distributed threshold, where collectivity and community struggles are bound to strict boundaries. Merz may proceed with his economic gambles, but the cost of Germany’s recovery is likely to fall on those least able to carry it. The question remains whether this path, rooted in exclusion, will lead to the strength the country seeks, or only increase the faults it promises to heal.
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